What I Learned Last Week curates the most interesting content relating to business acquisitions, operations, entrepreneurship, finance, and more. WILLW is a publication of The Business Inquirer.
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📰 Articles
Software Equity Group (SEG) released its 1Q 2022 SaaS report.
Some notable highlights include:
EV/Revenue multiples dropped significantly for public SaaS companies, down 30% from 13.9x in 4Q21 to 9.8x in 1Q22.
SaaS M&A deal volume had a record high of 617 deals in 1Q22, the highest quarterly deal volume since we began tracking data in 2002.
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Jay Vasantharajah wrote a great post about maximizing and propoerly allocating business cash flow.
The main lesson here is to challenge yourself as a business owner by asking if cash is currently optimized and allocated to the best use. In this example, by reallocating cash that was parked in the working capital of your small business, you’ve created significant value. That’s the power of combining operating prowess, shrewd capital allocation, and thinking in future dollars.
How To Turn Your Small Business Into A Mini Berkshire Hathaway
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Buy Small Sell High newsletter talks about the fact that predictable cash flow doesn’t just come from businesses that have a recurring revenue model. As an acquirer, you open up your opportunity set significantly if you don’t focus on recurring revenue but on predictable cash flows.
To be fair, for reoccurring or non-recurring businesses your predictability of cash flow is only as good as your analysis and assumptions. However, being able to analyze those businesses multiplies the number of available companies and greatly increases your odds of finding a business to buy. And if you do, your upside is probably a lot greater.
Recurring Revenue Is Overrated
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XO Capital failed to raise $1M for their fund. I’m rooting for them and love their honest, transparent look into what went right, wrong, and what’s next.
At the beginning of the month we decided to go out and try to raise $1M in equity into XO Capital. We failed.
We've tried two paths. One is a fundless sponsor model and one is a straight equity raise. Let's go through both and get into the weeds.
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Starter Story has a great article with 50 strategies to grow your SMB.
How To Grow Your Small Business: 50 Strategies & Examples You Can Use Today [2022]
🧵 Twitter
Great framework for creating a product strategy…
This is an often overlooked area of diligence…
Discussion on key questions to ask when first communicating with the seller…
Long thread but offers tons of detail around the acquisition process…
Properly structure your legal entity…
Some interesting disclosures here…
Great founder story…
🤔 Thoughts, Events, Other
udu
I recently discovered a new deal sourcing tool called udu. Built by a team of technologists, the platform uses AI to source acquisition targets. In addition to list building, their AI ranks targets based on your specific criteria. They’ve been around for over 7 years and work with searchers, SMBs, SMEs, and private equity groups. I’m going to be having more conversations with them to learn about their platform.
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Data Services
Sourcescrub and PE Stack are hosting a free webinar discussing various data services in dealmaking. I assume there will be some self-promotion here.
It’s clear the right data can help not only spot valuable investment and acquisition targets, but win more deals. The big question is which data service or platform is best for your firm.
Tim Friedman, founder of PE Stack, has been deep in this world as a dealmaker, product strategy consultant and data provider executive. He has strong feelings about product selection strategy based on years of practical experience which he’ll share during our webinar.
And to make sure we keep it real, we’ll also have by Abe Borden, director at Diversis Capital. Abe will provide frontline perspective from what he has seen sourcing, qualifying and executing new deals.
Join our conversation May 11 at 10:00am PDT/1:00pm EDT for some unvarnished opinions and questions you need to consider as you evaluate the options.
Unvarnished Opinions About Dealmaking Data Services
🛠 Tools & Resources
These are tools & resources that I personally use or have used. They may contain affiliate links so I’ll get a few pesos if you sign-up.
Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.
X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.
Curators - Proprietary deal sourcing. You need targets that fit your investment criteria, and Curators delivers week after week - we even update your personalized database on a daily basis with new information on best-fit targets.
BizNexus - Proprietary deal flow, deal aggregator, and exit prep.
PrivSource - Deal aggregator for lower and middle-market listings.
ProjectionHub - Access to 50+ CPA-developed financial projection templates. 25% discount using code “duedilio” at checkout.
Logology - Best automated logo & brand identity tool I’ve come across.
DeepBench - Access a cutting-edge expert network. $200 discount.
OpenPhone - The best business phone solution that I have found. $20 credit.
Eloquens - Knowledge marketplace. I’ve bought a few guides and templates here.
Deal Flow Scout - Peer-to-peer deal flow exchange. Free, open, transparent.
Deal Sourcing Guide - A directory I put together of online marketplaces, brokers, DFY deal flow, and more.
That’s all for this issue of What I Learned Last Week!
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Important Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, it has not been independently verified. The Business Inquirer makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. References to any companies, securities, listings, investments, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any business, tax, or investment decisions. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.